Entergy, FPL Group plan union

TedGriffith

JUNO BEACH, Fla. (CBS.MW) -- Electrical-power giant FPL Group said Monday it will acquire Entergy Corp. in a stock swap that the companies say will create the nation’s largest electric utility company.

The utilities said the combined entity would have a value of $27 billion, based on its $16.4 billion in stock-market capitalization and $10.7 billion in debt and preferred stock. Although the companies described the deal as a “merger of equals,” FPL shareholders will control 57 percent of the new company while Entergy shareholders will own 43 percent.

The merger, which was backed by both company boards, still needs approvals from shareholders and federal regulatory agencies.

A merger would give the newly combined entity, as yet unnamed, 6.3 million customers and a generating capacity of more than 48,000 megawatts, making it the biggest power producer in the country, the companies said.

Under the plan, every share of Juno Beach, Fla.-based FPL (FPL) would be converted into one share of the new holding company. Shareholders of Entergy (ETR) would receive 0.585 of a share of the new company for each share of Entergy, which is headquartered in New Orleans.

The companies also said they have authorized a share buyback program of both shares totaling $1 billion to be executed before the close of the merger. The buyback programs -- $570 million at FPL Group and $430 million at Entergy -- include remaining authorizations from the companies’ existing share repurchase programs.

The companies said the merged company would have strong profit growth and would be better able to compete in a market that is being transformed by utility deregulation. In addition, the companies said the merger transaction would immediately boost earnings based on consensus analysts’ earnings estimates.

“We expect to deliver average annual earnings per share growth of 10 percent or more over the next several years fueled by a combination of revenue enhancement opportunities and cost savings,” FPL Chairman James Broadhead said in a statement. “Our strong balance sheet and increased cash flows will enable our new company to more aggressively pursue profitable growth opportunities.”

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